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Cheque bounce case - An Overview

In a Cheque bounce case, an overview typically involves the account holder issuing a cheque to the payee, which is then presented to the bank for payment. However, due to insufficient funds or other reasons, the cheque bounces, causing complications for both the payer and the payee. The bank notifies the account holder about the insufficient funds in their account, leading to potential legal consequences.

Consequences of Dishonoured Cheque

The consequences of a dishonoured cheque in India can be financially and legally serious.

  • Financial penalties: The bank will charge a penalty for dishonouring a cheque. This penalty can be up to ₹200, payable by the cheque's drawer.
  • Criminal prosecution: If a cheque is dishonoured due to insufficient funds, the cheque drawer can be prosecuted under Section 138 of the Negotiable Instruments Act 1881. This is a criminal offence, and the drawer can be sentenced to imprisonment for up to two years, or a fine of up to twice the cheque amount, or both.
  • Civil suit: The payee of the dishonoured cheque can also file a civil suit against the drawer to recover the cheque amount. The payee can also claim damages for any loss or inconvenience caused by the dishonoured cheque.
  • Damage to reputation: A dishonoured cheque can damage the reputation of the drawer. This can make it difficult to get loans or credit in the future and damage relationships with businesses and individuals.

Procedure for a Cheque Bounce Case

  • Step 1: The first step is to send a Demand Notice to the person who has issued you a bounced cheque
  • Step 2: The notice should include details regarding the bounced cheque. The notice should include information such as the date the check was issued and a copy of the dishonoured memo
  • Step 3: The person has 15 days from the time they receive the notice to pay you
  • Step 4: If they don't, you can file a complaint in the prescribed format in the court
  • Step 5: You must also present an oath letter, a copy of the notice issued with the acknowledgement receipt, a photocopy of the memo, and the bounced cheque received, in addition to the complaint form
  • Step 6: When the judicial court gets your complaint, it will review and verify the documents you sent
  • Step 7: Once the court is satisfied with your cheque return case, the complainant or their lawyers must fill out the bhatta or cheque bounce case process form, after which the accused is summoned to appear in court
  • Step 8: If the accused fails to appear in court, the judge has the authority to issue a bailable warrant against the person in question.

Note: It is advisable to hire lawyers to assist you with filing a cheque return case. This is because lawyers are familiar with the entire cheque bounce case process and how to fill out the form in the appropriate legal format.

cheque bounce case

How to Issue Cheque Bounce Notice?

If you have received a bounced cheque from someone, you have the right to take legal action against the issuer of the cheque. The initial stage in this procedure is to send an official notice of a bounced cheque to the issuer, asking payment of the amount due. Here's how to send a notice about a bounced check:

  • Create a Demand notice: The first action is to create a notice for a bounced check. Details like the cheque number, the cheque's amount, the cause of the bounce, and a demand for payment of the amount should be included in the notice.
  • Send the notice: Send the notice to the issuer of the cheque through registered post or hand delivery, and ensure that you have proof of delivery
  • Wait for a response: Once the issuer receives the notice, they have 15 days to make the payment. If they fail to do so, you can proceed with legal action.

It is important to note that cheque bounce notices should be drafted and sent by a legal professional or a person with knowledge of the legal procedures involved.

Cheque Bounce Notice Format

A cheque bounce notice is a legal document that demands payment of the amount due on a bounced cheque. Here's a standard format for a cheque bounce notice:

  • Your name and address
  • Date of notice
  • Name and address of the issuer of the cheque
  • Details of the bounced cheque, including cheque number, date of issue, amount, and reason for bounce
  • In 15 days of procuring the notice, the demand for payment is made
  • A threat of legal action is issued if money is not received within the allotted period.

It is important to note that the format of the cheque bounce notice may vary depending on the specific circumstances and legal requirements.

Reasons for Cheque Bounce in India

There are many reasons why a cheque might bounce. The most frequent one is that the payer's bank account doesn't have enough money when the cheque is presented. This is known as 'insufficient funds bounce.'

1. Insufficient Funds: If the payer's account does not hold enough money, the cheque will be returned or 'bounced.'

2. Signature mismatch: When the signature on the cheque differs from the one registered with the bank, the cheque may be refused.

3. Incorrect account number: If the account number written on the cheque does not correspond with the payer's account, the cheque could bounce.

4. Damaged cheque: A disfigured or defaced cheque may lead the bank to dishonor it.

5. Dated cheque: If a cheque is presented after its written date, it could result in a bounce.

6. Stop Payment instruction: If the payer requests their bank to halt the cheque payment, it will consequently bounce.

Cheque Bounce Rules

In case a person is filing cheque bounce case, there are certain Cheque Bounce rules they have to follow.

  • The first step is to send a demand notice to the offender
  • Once the notice is received, the offender has 15 days to make the due payment
  • Under Section 138 of the Negotiable Instruments Act, 1881, the payee has to send the drawer a notice within 30 days of receiving the cheque return memo
  • If the drawer fails to make the payment, then the person filling the cheque bounce case has every right to file a complaint with the court by submitting a written complaint along with valid documents
  • The bank's cheque return memo is one of the most important documents. The court will be unable to proceed with the case without this document
  • The defaulter cannot be penalized in the eyes of the cheque bounce law if the bounced cheque was given as a gift or used to lend money for a loan payment.

New Cheque Bounce Rules in India

According to a letter the Reserve Bank of India (RBI) handed out in early August 2021, customers who frequently use cheques or who just desire to use cheques will need to maintain a minimum bank balance. If this minimum balance is not maintained, the cheques will bounce. A penalty charge may also be owed by the individual who wrote the cheque. The RBI has made the National Automated Clearing House (NACH), which was also updated.

These reforms apply to all public and commercial banks. The new regulation was implemented to speed up and overall improve cheque clearance. The new regulation ensures that NACH will be open every day of the week, allowing it to process and pass cheque on Sundays.

Circumstances of Cheque Bounce

Cheque bounce notice is issued when the presented cheque bounces due to insufficient funds. It forces the issuer of the check to pay the amount, you can send them a notice that the check has bounced. Before a cheque bounce notification is sent, though, the following requirements must be satisfied:

  • The check's three-month validity period, during which it must have been presented to the bank, must have been met
  • The cheque should be returned by the bank due to less funds, a signature mismatch, or other reason
  • The notice has to be sent out within the first 30 days of getting a notification on cheque bounce.

Once these conditions are met, you can proceed with issuing a cheque bounce notice.

Issuance of Cheque Bounce Notice

When a cheque bounces, the payee has a legal recourse to recover the amount due from the drawer. The first step in this process is to issue a cheque bounce notice to the drawer. This notice must be issued within 30 days of the date the cheque was dishonored.

The cheque bounce notice must be in writing and must contain the following information:

  • The name and address of the payee
  • The date of the cheque
  • The number of the cheque
  • The amount of the cheque
  • The reason why the cheque was dishonored
  • A demand that the drawer pay the amount of the cheque within 15 days of receiving the notice

The notice can be served on the drawer in person or by registered post.

If the drawer does not pay the amount of the cheque within 15 days of receiving the notice, the payee can file a cheque bounce suit against the drawer in the court of the Judicial Magistrate.

Jurisdiction

The cheque bounce suit can be filed in the magistrate's court within whose jurisdiction the bank branch where the cheque was deposited is located.

Process of Cheque Bounce Suit

The process of a cheque bounce suit is as follows:

1. Filing a complaint: The payee must file a complaint with the court of the Judicial Magistrate. The complaint must be in writing and must contain the following information:

  • The name and address of the payee
  • The name and address of the drawer
  • The date of the cheque
  • The number of the cheque
  • The amount of the cheque
  • The reason why the cheque was dishonored
  • Copies of the cheque, the cheque bounce notice, and the acknowledgment of receipt of the cheque bounce notice

2. Issuance of summons: The magistrate will issue a summons to the drawer, directing him to appear in court on a specified date to answer the charges.

3. Appearance of the drawer: The drawer must appear in court on the specified date. If he fails to appear, the court may issue a warrant for his arrest.

4. Examination of the complainant: The magistrate will examine the complainant and his witnesses.

5. Examination of the drawer: The magistrate will then examine the drawer. The drawer may plead guilty or not guilty.

6. Judgment: If the drawer pleads guilty, the magistrate will convict him and pass sentence. The sentence may include imprisonment for up to two years or a fine of twice the amount of the cheque, or both. If the drawer pleads not guilty, the magistrate will hear evidence from both sides and then deliver a judgment. If the magistrate finds the drawer guilty, he will convict him and pass sentence. If the magistrate finds the drawer not guilty, he will dismiss the case.

Documents Needed for Cheque Bounce case

While filing a complaint against a party in a cheque return case, you need to submit an application form along with the following documents:

  • The original cheque
  • Memo of returning cheque which would contain the reason about non-payment by the bank
  • Copy of demand notice and the original receipts.
  • An affidavit stating evidence.

Legal Action for Cheque Bounce Case

Cheque bounce is a criminal offence in India, covered under Section 138 of the Negotiable Instruments Act of 1881. So, if a complaint is filed in a court and, if found guilty, the defaulter can be punished with a prison term of two years and/or a fine, which can be as high as twice the cheque amount.

In some cases, the court might grant cheque bounce case punishment, this is usually if the court finds the infraction heinous.

Contents of Cheque Bounce Notice

The cheque bounce notice should include the following contents:

  • Details of the cheque, including the cheque number, date of issue, amount, and the bank on which it was drawn
  • Reason for the bounce, which could be due to insufficient funds, mismatched signatures, or other reasons
  • Demand for payment of the amount due, which should include the principal amount, interest, and any other charges
  • An intimation regarding the legal action if the payment is not made within the stipulated time
  • The legal notice has to be sent through a registered post and the sender should have the proof of delivery.

It is important to draft the cheque bounce notice carefully, ensuring that it complies with the legal requirements and includes all relevant information. It is highly recommended to get in touch with our Legal Experts to resolve all your queries regarding the process. Our team will draft the legal notice aptly.

Cheque Bounce Charges

The terms ‘dishonoured cheque’ or ‘cheque bounce’ are used when a bank refuses to honour a cheque that was used to pay for something. Additionally, the bank levies a set fee on customers whose checks bounce.

Name of BankType of AccountCharges for Local ChequesCharges for Outstation ChequesCharges for Cheque Return
SBIAllCheque/bill up to ₹1.00 lakhs – ₹150/- + GST Cheque/bill above ₹1.00 lakhs – ₹250/- + GSTN/ACheque returned charges for Cheques drawn on SBI (for insufficient funds only) (for all segments) – ₹500/- + GST (irrespective of the amount) Cheque returned charges for Cheques drawn on SBI (for technical reasons) for all segments when the customer is at fault – ₹150/-+ GST
HDFC BankSavings AccountOutward: ₹100/- Inward: First cheque return in a quarter – ₹350/-. From second cheque return in the same quarter – ₹750/- per returnOutward: ₹100/- Inward: ₹350/-Dishonour of Outstation Cheques Regular Savings – Outward: ₹100/- Inward: ₹350/- Senior Citizen Account – Outward: ₹80/- Inward: ₹350/-
HDFC BankCurrent AccountOutward: ₹50/- Inward: ₹300/-Outward: ₹50/- Inward: ₹300/-N/A
ICICI BankAllCheque deposited by the customer – ₹100/- (for every cheque return for financial reasons) Cheque issued by the customer – ₹350/- (for one cheque return per month); ₹750/- per return in the same month for financial reasons. ₹50/- for non-financial reasons except for signature verification for every cheque return for financial reasons.Outstation cheque deposited by the customer – ₹150/- + other bank charges at actuals per cheque.N/A
Axis BankAllReturn of cheques deposited at the home branch for local clearing – ₹500/- per chequeN/AN/A
Bank of BarodaAllCheque (deposited by BOB’s customer and returned unpaid (Inward Return) Up to ₹1 lac – ₹125/- Above ₹1 lac to less than ₹1 crore – ₹250/- Above ₹1 crore – ₹500/-N/ACheque (drawn on BOB) returned (Outward Return)– (Financial Reason) Up to 1 lakh – ₹250/- Above ₹1 lakh to less than ₹1 crore – ₹500/- For ₹1 crore and above – ₹750 per instrument In case the bank remains out of funds; actual interest @ 7.5% over base rate is to be charged extra For other reasons – ₹250/-

How to Respond to a Cheque Bounce Case?

The initial stage is to reply to the legal notice with your defence or pay the requisite sum by cheque in order to halt future legal proceedings. Thus, before answering, you must first consult a lawyer who focuses on cheque bounces. If the cheque amount is paid at the beginning, the issue will be resolved immediately. Despite the fact that the format for the answer to the legal notice is flexible, be sure to address the following points:

  • The drawee's attorney should receive the response to the legal notification
  • Name, address, and a brief description of yourself
  • Details regarding the problem, like the memo describing a returned cheque
  • Answer the criticisms that have been levelled at you
  • Refrain from answering any of the questions in the notification that accuse you of anything
  • Any complaints against the cheque beneficiary
  • A response to the allegations in the legal notification for a bounced cheque, setting out your defence
  • A legal letterhead must be used for every correspondence in response to a legal notice.

If you don't answer the legal notification or pay the cheque amount within 15 days, the drawee is legally entitled to file a complaint with the court, which will launch legal action against you.

How Can A Lawyer Help To Draft Cheque Bounce Notice Format?

It's crucial to draft a cheque bounce notice in case of recovering the money. Since the notice serves as the first step towards initiating a legal proceeding, it is advisable to seek the assistance of a cheque bounce lawyer. Our team of expert lawyers can help in case of cheque bounces in the following way:

1. Our professional possesses the required expertise and knowledge to prepare a legally sound notice
2. We can gather crucial information on behalf of their client and draft the notice accordingly
3. Cheque bounce lawyer can ensure that you are on the right track towards achieving justice
4. Our legal team can handle all the necessary legal documentation with efficiency.

Thus, it is crucial to hire an experienced cheque bounce lawyer to ensure that the legal notice is sent appropriately and considering the potential litigation that may follow

Parties to the Cheque

Drawer: The term 'drawee' refers to the person who writes the cheque, or the 'author of the cheque.' (The debtor might be the drawer.)

Payee: The term 'Payee' refers to the party on whose behalf the cheque is drawn and to whom the amount specified in the cheque is payable. (The Payee may also be the Creditor.)

Drawee: The bank that must pay the amount on the cheque, or the bank that has been given the order to do so, is known as the drawee

Payee’s Bank: The bank where the payee has a bank account and where the amount of the cheque must be deposited or credited (particularly in the case of a crossed cheque) is referred to as the 'payee's banker.'

Remedies Against Cheque Bounce

Resubmission of cheque

If a cheque fails owing to overwriting, an incorrect signature, a discrepancy between the amount printed in words and figures, or a damaged cheque, the payee may ask that the drawer issue another cheque to make up for the mistake. The payee may bring a civil lawsuit to recover the whole amount of the overdue cheque, not only the cost of the bounced cheque, if the drawer refuses to produce another cheque.

How can a lawyer help to draft a Cheque Bounce Notice Format?

  • A notice of legal action must be issued through the advocate or legal counsel of the concerned party
  • In cases of cheque bouncing, it is imperative to retain the services of a specialised lawyer
  • The issuance of a cheque bounce notice marks the initial stage of any potential litigation
  • For optimal legal representation, it is highly recommended to secure the services of a cheque bounce lawyer
  • An experienced lawyer possesses the necessary legal acumen to draft and obtain vital information for such notices
  • Moreover, a skilled cheque bounce lawyer can adeptly handle all legal paperwork associated with such cases
  • Thus, engaging an adept cheque bounce lawyer is pivotal in ensuring the proper dispatch of legal notices and the appropriate handling of legal proceedings.

Important Points for Cheque Bounce Notice

There are a few things to take care of before mailing a legal notification for a bounced cheque. For those who are unclear of how to send a notification of a bounced cheque so that the court would find in their favour, consider the following tips:

The original copies of the cheque and return memo should be kept in a safe place. Sending the legal notification for a returned cheque can be done in one of the following ways:

  • Post through WhatsApp through an advocate
  • Registered Post Acknowledgement Due (RPAD)
  • Or email, a case under Section 138 of the Negotiable Instrument Act,1881 must be brought by the person in whose favour the cheque was written.

This is crucial to remember when utilising the cheque bounce notice type. In line with Section 138 of the Negotiable Instrument Act,1881 , a bounce notification is delivered to the person who drew the dishonoured cheque.

In the event of a company, the Negotiable Instrument Act,1881 cheque bounce is addressed to the company; alternatively, it might be sent to the people in charge of managing the company's administrative and business operations. The precise amount for which the dishonoured cheque was written should be stated in the legal notification for cheque bounce; however, additional information, such as dishonour fees or legal costs, is permitted.

While the financial transaction against a debt is the emphasis of Section 138 of the Negotiable Instrument Act,1881 , the reason the cheque was drawn should be indicated as well. The transaction must be legal under existing laws, thus the purpose for which the cheque was issued must not be illegal. Despite the fact that the law stipulates a notice period for cheque bounces, it is best to be safe and include this information in the legal notice that is being served.

It should be noted that the statute of limitations for a legal notification under Section 138 of the Negotiable Instrument Act,1881 starts when the cheque is presented for encashment. Hence, if the cheque was initially presented and the deadline for serving legal notice has passed, it may be presented again for encashment in order to acquire another cheque bounce memo, providing the cheque validity permits it.

Why Vakilsearch?

We at Vakilsearch are constantly working to make the legal cheque bounce case process in India more accessible. We know the best practices and laws. Here are some reasons why you should choose us:

  • There are no additional fees.
  • Your personal information is kept private and secure.
  • You'll have access to the finest legal experts and in the field.

Note: For every issue or concern you may have, our experts will assess your situation and advise you on the best course of action.

Cheque Bounce FAQ's

A cheque return memo is a note from the bank. It's given when a cheque bounces. The note will explain why the cheque couldn't be paid.
Yes, you can present a cheque to the bank again even if it bounced once. However, it's important to understand why it bounced the first time to avoid it happening again.
In most cases, you should wait 15 days before filing a complaint with the court. Make sure to send all of the necessary documents, as stated previously.
You cannot bring charges against the drawer if the bounced check was presented to you as a gift or was lent to you for the repayment of a loan installment.
Yes, you need to submit documents along with the complaint letter to the court. Documents such as the Cheque Return Memo, the original bounced cheque, a copy of the notice sent along with the acknowledgement receipts, and an affidavit stating evidences need to be sent to the court in original format.
If you don’t file a complaint within the stipulated 30 days, the case will lapse. However, in certain circumstances, the court may grant you an extension.
Yes, you can. A cheque dishonoured under the stop payment instruction is covered under the Section 138 of the NI Act. So, you have every right to press charges. This can be done only after you have sent a Demand Notice to the drawer.
The time taken to get the court judgement in a cheque bounce case in India depends on several factors such as the complexity of the case, the number of witnesses, and the court's backlog. However, as per the recent amendment in the Negotiable Instruments Act, 1881, the trial must be concluded within six months from the date of filing the complaint.
Yes, Section 138 of the Negotiable Instruments Act,1881 is bailable, which means that the accused can apply for bail and be released from custody while the trial is ongoing.
You can recover your money in a cheque bounce case by filing a complaint under Section 138 of the Negotiable Instruments Act,1881. After the complaint is filed, the court will issue a summons to the accused, and if the accused fails to appear in court, a warrant may be issued for their arrest. If the accused is found guilty, they can be ordered to pay the amount due, along with any additional penalties or charges.
Yes, a bounced cheque can be deposited again, but it is advisable to contact the issuer of the cheque and resolve any issues before attempting to deposit the cheque again.
Yes, a bounced cheque can affect the CIBIL score of the issuer of the cheque. It can have a negative impact on their creditworthiness and may make it difficult for them to obtain credit or loans in the future.
A notice under Section 138 can be sent by the person who has received the bounced cheque and is entitled to receive the payment. This person can be the payee or the holder of the cheque.
There is no significant difference between a dishonoured cheque and a bounced cheque. Both terms are used interchangeably and refer to a situation where the cheque is not honoured by the bank due to insufficient funds or other reasons.
The validity of a bounced cheque is the same as that of a valid cheque. The cheque remains valid for six months from the date of issue, after which it becomes stale and cannot be encashed.
The penalty charge for a bounced cheque is not fixed and may vary depending on the bank's policies and the amount of the cheque. Typically, banks charge a penalty fee ranging from a few hundred to a few thousand rupees.
Charges for cheque bounce penalties range from one bank to another from ₹50 to ₹750.
Yes, You have the right to report the cheque issuer to the police. For breaking Articles 420 or 406 of the Indian Penal Code, the issuer of the cheque could thus be brought up in court (IPC). Instead, in accordance with Section 138 of the Negotiable Instruments Act of 1881 for a cheque bounce case, the payee may, upon the issuing of a notice of cheque bounce, promptly present a complaint before the Magistrate.
Yes, If the cheque you issued bounces due to inadequate funds in the account, it is a crime and you may be arrested. To prevent dishonest people from duping innocent people into making payments and from fleeing the nation, the punishment of imprisonment is offered. Although it is a crime, bail is available. So long as you promise to appear in court when necessary, you can get bail.
The judgement could take up to five years to take effect if the matter goes to trial. The legal process in India [under the Negotiable Instruments Act] for situations of cheque bounce is simple.
The drawer of the cheque must present the cheque no later than 30 days after the day it was honoured in order to exercise his rights under the Negotiable Instruments Act.

Recent Updates

The Bombay High Court has granted an interim stay on the trial court proceedings in a cheque bouncing case of ₹200 crores involving businessman Anil Ambani. The stay was granted under Section 138 of the Negotiable Instruments Act, in connection with a writ petition filed by two co-accused. Anil Ambani is accused of bouncing a post-dated cheque for ₹200 crores in relation to a recall notice issued by LIC for outstanding NCDs. The matter has been adjourned to 12 July 2023.